Nigeria: MTN's Shares Drop 23% After CBN's U.S.$8.1 Billion Sanction

The shares of the MTN Group dropped as much as 23 per cent to a nine-year low, yesterday, a day after the Central Bank of Nigeria (CBN) ordered the telecoms firm to repatriate $8.1 billion alleged to have been sent abroad illegally.

The News Agency of Nigeria (NAN) reports that at trading on the Johannesburg Stock Exchange, MTN shares were down 21.4 per cent at 84.35 rand, after touching 83 rand, a level last seen in 2009.

The CBN's demand is the latest setback for MTN Nigeria, the South African group's most lucrative but increasingly also its most problematic market.

It comes two years after MTN, Africa's biggest telecoms company, agreed to pay a fine of more than $1 billion for allowing the use of millions of improperly unregistered SIM cards on its network.

But in a statement, MTN Nigeria refuted the CBN's claim in strong terms.

Signed by its public relations manager, Funso Aina, MTN said it received a letter on August 29 from the CBN alleging that the Certificate of Capital Importation (CCI) issued in respect of the conversion of shareholders' loans in MTN Nigeria to preference shares in 2007 had been improperly issued, and that consequently, the historic dividends repatriated by the telecommunications firm between 2007 and 2015 amounting to $8.1 billion needed to be refunded to the apex bank.

It claimed no dividends have been declared or paid by the Nigerian arm other than pursuant to CCIs issued by its bankers with the approval of the CBN as required by law.

He explained that the issue surrounding the CCIs has already been the subject of a thorough enquiry by the Senate of Nigeria.

According to him, "in September 2016, the Senate mandated the Committee on Banking, Insurance and other Financial Institutions to carry out a holistic investigation on compliance with the foreign exchange (monitoring and miscellaneous) act by MTN Nigeria and others.

In its report issued in November 2017, the findings evidenced that MTN Nigeria did not collude to contravene the foreign exchange laws and there were no negative recommendations made against MTN Nigeria."

Aina said MTN Nigeria, as a law-abiding body, is committed to good governance and to abiding by the extant laws of the Federal Republic of Nigeria.

Promising to "engage with the relevant authorities and vigorously defend our position on this matter and provide further information when available," MTN, however, added: "The re-emergence of these issues is regrettable, as it damages investor confidence and, by extension, inhibits the growth and development of the Nigerian economy."

This concern was re-echoed by Greg Davies of boutique investment house, Cratos Capital, in Johannesburg, who noted: "You just can't do business in an environment where these type of things are going to happen."

The CBN's director of corporate communications, Isaac Okorafor, said on Tuesday that investigations specifically revealed that $3.45 billion was allegedly repatriated by Standard Chartered Bank on the basis of illegally issued CCIs.

Okorafor said the investigations by the CBN in March 2018 became necessary, following allegations of remittances of foreign exchange with irregular CCIs issued on behalf of some offshore investors of MTN Nigeria.

Already, the CBN has ordered the managements of the four banks and MTN Nigeria to immediately refund the $8.1 billion allegedly repatriated by the company to the coffers of the apex bank.

The CBN investigation further revealed that on account of the illegal conversion of MTN shareholders' loan to preference shares (interest free loan) worth $399.5million, the company illegally repatriated $8.13 billion.

Okorafor said the investigations were thorough and allowed all the parties a fair hearing. He advised banks and multinational companies in Nigeria to adhere strictly to extant regulations in their foreign exchange transactions.

Asked to react, Citibank's head of media, Lola Oyeka, said she could not speak on the matter.

She, however, noted that if the bank had a statement, it would be made available.

Standard Chartered Bank Nigeria, in a statement, said: "While we cannot provide additional information due to ongoing engagement with the regulators, we look forward to a rapid resolution and satisfactory outcome of this matter."

The heads of media of the remaining banks could not be reached for comments.

Meanwhile, the fine levied on the banks has pushed the stock market to a N100 billion plunge.

At the close of transactions, yesterday, the banking sector of the Nigerian Stock Exchange (NSE) witnessed free fall in share prices, as 10 banking stocks, including those of Diamond and Stanbic IBTC recorded price depreciation, reversing the gradual recovery recorded in the sector at the re-opening of trading on Monday.

Operators told The Guardian the development was having a multiplier effect on the market, which is largely driven by activities in the banking sector.

Findings also revealed that a lot of investors who gave mandate for the purchase of banking stocks suddenly issued counter-directives, following the pronouncement, apparently fearing they may lose their investment.

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